Deputy Finance Minister Anil Jayantha Fernando’s assertion that the delayed fifth review can be expedited alongside the sixth review rests on the premise that Cyclone Ditwah merely shifted timelines. While true procedurally, IMF architecture is built on performance sequencing. Each review assesses data from a defined monitoring period before recommending Board approval.
Under the US$ 2.9 billion Extended Fund Facility approved in March 2023, Sri Lanka committed to fiscal consolidation, structural reforms, and debt sustainability. The programme’s backbone includes:
• Achieving sustained primary surpluses (targeted at -2.3-2.5% of GDP).
• Reducing the fiscal deficit gradually toward medium-term thresholds.
• Eliminating central bank financing of the deficit under the 2023 Central Bank Act.
• Implementing cost-reflective energy pricing and SOE governance reforms.
While the 2026 Budget’s 5.1% deficit and 2.5% primary surplus targets align broadly with IMF parameters, delivery remains the key variable. Revenue mobilization especially maintaining post-reform VAT and direct tax compliance will determine whether fiscal consolidation is durable or cyclical.
Moreover, debt sustainability analysis (DSA) is dynamic. Even with restructuring progress, the IMF evaluates forward-looking debt ratios and financing needs. A single quarter of strong performance does not replace cumulative compliance.
It is also important to distinguish between staff-level agreement and Executive Board approval. IMF staff may recommend review completion, but the Board’s vote ultimately triggers disbursement. Historically, countries have received multiple tranches within one calendar year when delayed reviews were successfully completed but only when macroeconomic indicators showed sustained stability.
Constructively, the Government’s forward-leaning stance could strengthen investor sentiment if matched by transparent data and reform continuity. However, premature expectations risk credibility gaps if benchmarks are narrowly missed.
The upcoming visit of IMF Managing Director Kristalina Georgieva on Monday 16 will reinforce partnership, yet the institution’s credibility depends on conditionality not diplomacy.
Sri Lanka’s path to a double disbursement is therefore technically possible but procedurally demanding. The deciding factor will not be ambition, but arithmetic.
